Question 1

Unplanned investment is

Accepted Answer

A)  the level of investment minus depreciation.
B)  the level of investment plus depreciation.
C)  investment that occurs that is unexpected by the government.
D)  investment that firms did not intend to make.E) A) and B)
F) A) and C)

Question 2

Figure 13-4
 P = Planned Investment.Suppose AE = C + IP, and IP is autonomous.If the level of real GDP equals $7,000 billion, and if there are no changes in the consumption function or in planned investment, then we expect that, in the next period, real GDP will A) rise. B) remain unchanged. C) fall. D) fall, but only if there is an offsetting change in autonomous consumption." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 13-4.Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption,
IP = Planned Investment.Suppose AE = C + IP, and IP is autonomous.If the level of real GDP equals $7,000 billion, and if there are no changes in the consumption function or in planned investment, then we expect that, in the next period, real GDP will

Accepted Answer

A)  rise.
B)  remain unchanged.
C)  fall.
D)  fall, but only if there is an offsetting change in autonomous consumption.E) B) and D)
F) A) and B)

Question 3

Personal saving is disposable personal income not spent on consumption.

Accepted Answer

A) True 
 B)False

Question 4

If the economy spends 80% of any increase in real GDP, then an increase in autonomous investment of $1 billion would result ultimately in an increase in equilibrium real GDP of

Accepted Answer

A)  $0.8 billion.
B)  $1.0 billion.
C)  $1.8 billion.
D)  $5.0 billion.E) None of the above
F) B) and C)

Question 5

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption.Which of the following events causes the aggregate expenditures curve to shift upwards? If government purchases increases by $200 billion, the aggregate expenditures curve will shift up by

Accepted Answer

A)  $200 billion.
B)  $200 billion xthe multiplier.
C)  $200 billion xmarginal propensity to consume.
D)  $200 billion x(1 ÷ marginal propensity to consume) .E) B) and C)
F) All of the above

Question 6

In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption, if the slope of the aggregate expenditures curve increases, the multiplier

Accepted Answer

A)  increases.
B)  decreases.
C)  remains constant.
D)  is undefined.E) A) and D)
F) A) and C)

Question 7

In the aggregate expenditures model, if a $40 billion increase in autonomous investment leads to an increase in equilibrium real GDP of $100 billion at the initial price level, then the multiplier is 2.5.

Accepted Answer

A) True 
 B)False

Question 8

Figure 13-6
 P = Planned Investment, G = Government Purchases.Further, IP and G are autonomous.What is the equation of the aggregate expenditures curve? All figures in billions of dollars. A) AE = G + IP B) AE = 800 + G + IP C) AE = 800 + G + IP + 0.5Y D) AE = 800 + 0.5Y" class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 13-6.Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption,
IP = Planned Investment, G = Government Purchases.Further, IP and G are autonomous.What is the equation of the aggregate expenditures curve? All figures in billions of dollars.

Accepted Answer

A)  AE = G + IP
B)  AE = 800 + G + IP
C)  AE = 800 + G + IP + 0.5Y
D)  AE = 800 + 0.5YE) A) and B)
F) C) and D)

Question 9

Figure 13-2
 
-Refer to Figure 13-2.If real GDP were $12 trillion, consumption equals

Accepted Answer

A)  5 trillion.
B)  7 trillion.
C)  9 trillion.
D)  11 trillion.E) C) and D)
F) B) and C)

Question 10

Figure 13-6
 P = Planned Investment, G = Government Purchases.Further, IP and G are autonomous.What is the level of autonomous aggregate expenditures? A) $800 billion B) $1,000 billion C) $1,600 billion D) $3,200 billion" class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 13-6.Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption,
IP = Planned Investment, G = Government Purchases.Further, IP and G are autonomous.What is the level of autonomous aggregate expenditures?

Accepted Answer

A)  $800 billion
B)  $1,000 billion
C)  $1,600 billion
D)  $3,200 billionE) B) and C)
F) None of the above

Question 11

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption.The marginal propensity to consume is 0.8.Suppose the equilibrium level of real GDP at the prevailing price is $500 billion below potential real GDP.All else constant, by how much should autonomous aggregate expenditures be increased to reach potential output?

Accepted Answer

A)  $625 billion
B)  $500 billion
C)  $400 billion
D)  $100 billionE) A) and B)
F) C) and D)

Question 12

Figure 13-4
 P = Planned Investment.Suppose AE = C + IP.IP is autonomous and the consumption function is C = $1,000 billion + 0.5Y.If Y= $6,000 billion, what is the value of consumption and planned investment? A) C = $3,000 billion, IP = $3,000 billion B) C = $4,000 billion, IP = $2,000 billion C) C = $5,000 billion, IP = $1,000 billion D) C = $6,000 billion, IP = zero" class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 13-4.Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption,
IP = Planned Investment.Suppose AE = C + IP.IP is autonomous and the consumption function is C = $1,000 billion + 0.5Y.If Y= $6,000 billion, what is the value of consumption and planned investment?

Accepted Answer

A)  C = $3,000 billion, IP = $3,000 billion
B)  C = $4,000 billion, IP = $2,000 billion
C)  C = $5,000 billion, IP = $1,000 billion
D)  C = $6,000 billion, IP = zeroE) All of the above
F) B) and C)

Question 13

Figure 13-5
 P = Planned Investment.Consider a simple economy where AE = C + IP, IP is autonomous And the consumption function is given by C = $1,000 billion + 0.75Y.What is the value of planned investment when real GDP is $6,000 billion? A) $3,000 billion B) $1,500 billion C) $1,000 billion D) zero" class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 13-5.Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption,
IP = Planned Investment.Consider a simple economy where AE = C + IP, IP is autonomous
And the consumption function is given by C = $1,000 billion + 0.75Y.What is the value of planned investment when real GDP is $6,000 billion?

Accepted Answer

A)  $3,000 billion
B)  $1,500 billion
C)  $1,000 billion
D)  zeroE) B) and C)
F) None of the above

Question 14

If consumption is given by C = $10 billion + 0.5Y, and autonomous planned investment, government purchases, and net exports amount to $5 billion, then aggregate expenditures are
$20 billion if Y = $10 billion.

Accepted Answer

A) True 
 B)False

Question 15

In the aggregate expenditures model, if a $50 billion increase in investment leads to an increase in equilibrium real GDP of $250 billion at the initial price level, then the multiplier is 4.

Accepted Answer

A) True 
 B)False

Question 16

The relationship between aggregate expenditures and real GDP is shown by the

Accepted Answer

A)  aggregate expenditures curve.
B)  consumption function.
C)  aggregate demand curve.
D)  autonomous expenditures curve.E) C) and D)
F) A) and D)

Question 17

Figure 13-6
 
-Refer to Figure 13-6.Suppose government purchases rise by $100.In the aggregate demand/aggregate supply model,

Accepted Answer

A)  the aggregate demand curve shifts to the right by $100 at any given price level.
B)  the aggregate demand curve shifts to the right by ($100 *the multiplier) at any given price level.
C)  there is a downward movement along the aggregate demand curve such that real GDP demanded increases by $100.
D)  there is a downward movement along the aggregate demand curve such that real GDP demanded increases by ($100 * the multiplier) .E) A) and B)
F) All of the above

Question 18

Suppose when disposable personal income increases from $10,000 to $15,000, consumption increases from $9,000 to $13,000.What is the marginal propensity to save?

Accepted Answer

A)  0.2
B)  0.4
C)  0.6
D)  0.8E) A) and C)
F) B) and D)

Question 19

Figure 13-5
 P = Planned Investment.Consider a simple economy where AE = C + IP, IP is autonomous And the consumption function is given by C = $1,000 billion + 0.75Y.What is the value of the multiplier? A) 0.75 B) 1.33 C) 4 D) It depends on the ∆AE and the ∆Y since the multiplier formula is ∆AE ÷∆Y." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 13-5.Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption,
IP = Planned Investment.Consider a simple economy where AE = C + IP, IP is autonomous
And the consumption function is given by C = $1,000 billion + 0.75Y.What is the value of the multiplier?

Accepted Answer

A)  0.75
B)  1.33
C)  4
D)  It depends on the ∆AE and the ∆Y since the multiplier formula is ∆AE ÷∆Y.E) A) and C)
F) A) and B)

Question 20

Which of the following statements is false?

Accepted Answer

A)  Two individuals who have the same current income but different permanent incomes are likely to make very similar savings decisions.
B)  An individual with a relatively low current income but a high permanent income might save little or nothing now, expecting to save for retirement and for bequests later.
C)  A person with a relatively low income now with no expectation of higher income later might try to save some money now to provide for retirement or bequests later.
D)  A decision to save a certain amount determines how much will be available for future consumption.E) C) and D)
F) A) and B)

Exam 28: Consumption and the Aggregate Expenditures Model

In the aggregate expenditures model, if a $50 billion increase in investment leads to an increase in equilibrium real GDP of $250 billion at the initial price level, then the multiplier is 4.

Correct Answer
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Suppose when disposable personal income increases from $10,000 to $15,000, consumption increases from $9,000 to $13,000.What is the marginal propensity to save?

Correct Answer
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Unplanned investment is

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Figure 13-5 -Refer to Figure 13-5.Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, I_P = Planned Investment.Consider a simple economy where AE = C + I_P, I_P is autonomous And the consumption function is given by C = $1,000 billion + 0.75Y.What is the value of the multiplier?

Correct Answer
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Correct Answer
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The relationship between aggregate expenditures and real GDP is shown by the

Correct Answer
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Figure 13-6 -Refer to Figure 13-6.Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, I_P = Planned Investment, G = Government Purchases.Further, I_P and G are autonomous.What is the equation of the aggregate expenditures curve? All figures in billions of dollars.

Correct Answer
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Figure 13-6 -Refer to Figure 13-6.Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, I_P = Planned Investment, G = Government Purchases.Further, I_P and G are autonomous.What is the level of autonomous aggregate expenditures?

Correct Answer
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If the economy spends 80% of any increase in real GDP, then an increase in autonomous investment of $1 billion would result ultimately in an increase in equilibrium real GDP of

Correct Answer
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Which of the following statements is false?

Correct Answer
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In the aggregate expenditures model, if a $40 billion increase in autonomous investment leads to an increase in equilibrium real GDP of $100 billion at the initial price level, then the multiplier is 2.5.

Correct Answer
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If consumption is given by C = $10 billion + 0.5Y, and autonomous planned investment, government purchases, and net exports amount to $5 billion, then aggregate expenditures are $20 billion if Y = $10 billion.

Correct Answer
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In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption, if the slope of the aggregate expenditures curve increases, the multiplier

Correct Answer
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Correct Answer
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Figure 13-6 -Refer to Figure 13-6.Suppose government purchases rise by $100.In the aggregate demand/aggregate supply model,

Correct Answer
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Figure 13-4 -Refer to Figure 13-4.Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, I_P = Planned Investment.Suppose AE = C + I_P.I_P is autonomous and the consumption function is C = $1,000 billion + 0.5Y.If Y= $6,000 billion, what is the value of consumption and planned investment?

Correct Answer
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Personal saving is disposable personal income not spent on consumption.

Correct Answer
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Figure 13-2 -Refer to Figure 13-2.If real GDP were $12 trillion, consumption equals

Correct Answer
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Exam 28: Consumption and the Aggregate Expenditures Model

In the aggregate expenditures model, if a $50 billion increase in investment leads to an increase in equilibrium real GDP of $250 billion at the initial price level, then the multiplier is 4.

Correct AnswerverifiedShow Answer

Suppose when disposable personal income increases from $10,000 to $15,000, consumption increases from $9,000 to $13,000.What is the marginal propensity to save?

Correct AnswerverifiedShow Answer

Unplanned investment is

Correct AnswerverifiedShow Answer

Figure 13-5 -Refer to Figure 13-5.Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, IP = Planned Investment.Consider a simple economy where AE = C + IP, IP is autonomous And the consumption function is given by C = $1,000 billion + 0.75Y.What is the value of the multiplier?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The relationship between aggregate expenditures and real GDP is shown by the

Correct AnswerverifiedShow Answer

Figure 13-6 -Refer to Figure 13-6.Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, IP = Planned Investment, G = Government Purchases.Further, IP and G are autonomous.What is the equation of the aggregate expenditures curve? All figures in billions of dollars.

Correct AnswerverifiedShow Answer

Figure 13-6 -Refer to Figure 13-6.Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, IP = Planned Investment, G = Government Purchases.Further, IP and G are autonomous.What is the level of autonomous aggregate expenditures?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the economy spends 80% of any increase in real GDP, then an increase in autonomous investment of $1 billion would result ultimately in an increase in equilibrium real GDP of

Correct AnswerverifiedShow Answer

Which of the following statements is false?

Correct AnswerverifiedShow Answer

In the aggregate expenditures model, if a $40 billion increase in autonomous investment leads to an increase in equilibrium real GDP of $100 billion at the initial price level, then the multiplier is 2.5.

Correct AnswerverifiedShow Answer

If consumption is given by C = $10 billion + 0.5Y, and autonomous planned investment, government purchases, and net exports amount to $5 billion, then aggregate expenditures are $20 billion if Y = $10 billion.

Correct AnswerverifiedShow Answer

In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption, if the slope of the aggregate expenditures curve increases, the multiplier

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 13-6 -Refer to Figure 13-6.Suppose government purchases rise by $100.In the aggregate demand/aggregate supply model,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 13-4 -Refer to Figure 13-4.Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, IP = Planned Investment.Suppose AE = C + IP.IP is autonomous and the consumption function is C = $1,000 billion + 0.5Y.If Y= $6,000 billion, what is the value of consumption and planned investment?

Correct AnswerverifiedShow Answer

Personal saving is disposable personal income not spent on consumption.

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Figure 13-2 -Refer to Figure 13-2.If real GDP were $12 trillion, consumption equals

Correct AnswerverifiedShow Answer

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Figure 13-5 -Refer to Figure 13-5.Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, I_P = Planned Investment.Consider a simple economy where AE = C + I_P, I_P is autonomous And the consumption function is given by C = $1,000 billion + 0.75Y.What is the value of the multiplier?

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Figure 13-6 -Refer to Figure 13-6.Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, I_P = Planned Investment, G = Government Purchases.Further, I_P and G are autonomous.What is the equation of the aggregate expenditures curve? All figures in billions of dollars.

Correct Answer
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Figure 13-6 -Refer to Figure 13-6.Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, I_P = Planned Investment, G = Government Purchases.Further, I_P and G are autonomous.What is the level of autonomous aggregate expenditures?

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Figure 13-4 -Refer to Figure 13-4.Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, I_P = Planned Investment.Suppose AE = C + I_P.I_P is autonomous and the consumption function is C = $1,000 billion + 0.5Y.If Y= $6,000 billion, what is the value of consumption and planned investment?

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